Thursday, 9 December 2010

HMV – How Much Value?

News is out that HMV is on the rocks. The share price fell a massive 29% in one day after the group reported like for like sales for the first half of the year fell 11%.

To add to this, HMV is already whining about the cold weather likely to hamper their Christmas sales. This is the key period of the year for any retailer and it looks like shareholders shouldn’t expect any better for the future.

I have to say that I am not very surprised. For a long time I have been talking about how little is being done by the traditional music stores to adapt to the changing market. As long ago as 2007, I guest blogged on David Taylor’s brandgym site about Zavvi , and most of you will remember them going into administration in December 2008.

I blogged that when they took over from Virgin, they just changed the name and nothing else with what I like to call “a hope and pray” strategy. Why did they think Richard Branson was divesting the business? In my opinion because he knew when to get out of a declining business (music and DVDs purchased in store).

HMV are of course now suffering the full force of this declining business and are finally addressing it by changing into a broad based entertainment group, diversifying into live music and events as well as clothing (not sure about this one). But it is all a little too late for me. In addition, they are not addressing their core business: purchasing in store.

A couple of years ago they could have participated in the revolution for delivery of books and music. With such a hugely well known and well respected brand name, they could have shaped the market.

First, they should have been a leader online but they have been trounced by newcomers such as and the might of apple’s itunes. They have only recently relaunched their own digital platform.

And they have done nothing to fill the gap that internet just can’t do as well as in store: experience.

Where are the interactive pods that let me search online for music and then let me download straight on to my mp3 player? Where is the jukebox where I type in names of bands I like and proposes me ones I might like, Where are the pods to play new xbox and wii games so I can try and then buy. Where is the experiential pop ups outside their own stores to get people to interact with their products, sign up or maybe some into the store to see what else there is. If you can get people into your store then they might actually buy.

There are loads of teenagers hanging around town centres with nothing better to do. HMV could have been a mecca for music lovers with events and trials.

But no, they stack CDs and DVDs in rows and you can browse and then pay. Whoppee do.

HMV you have got to invest and catch up quick or you’ll be left with a nostalgic brand name and not much else.